Lewis is selling a product with some of the transaction price depending on the outcome of a future event. There is a 75% chance that the event will result in $100,000 of consideration to Lewis, and a 25% chance that the event will result in $40,000 of consideration to Lewis. Which of the following is not an appropriate estimate of the amount of uncertain consideration for purposes of Lewis estimating the transaction price?

A) $100,000.

B) $85,000.

C) $70,000.

D) a-c are all appropriate estimates.

Question

Business

Alyssa

16 October, 15:46

Lewis is selling a product with some of the transaction price depending on the outcome of a future event. There is a 75% chance that the event will result in $100,000 of consideration to Lewis, and a 25% chance that the event will result in $40,000 of consideration to Lewis. Which of the following is not an appropriate estimate of the amount of uncertain consideration for purposes of Lewis estimating the transaction price?

A) $100,000.

B) $85,000.

C) $70,000.

D) a-c are all appropriate estimates.

+3

Answers (1)

Know the Answer?

Rodolfo Valentine · Answer 1

correct option is C) $70,000.

Explanation:

given data

chance event = 75%

result of consideration to Lewis = $100,000

chance event = 25%

result of consideration to Lewis = $40,000

solution

we get here amount of uncertain consideration that is

amount = (75% x $100,000) + (25% x $40,000)

amount = $85000

so that answer b that likely amount is $100,000 but here we have not an appropriate estimate of the amount is $C) $70,000